Analysis Topic: Stock & Financial Markets

Sunday, November 02, 2008

Current Position of the MarketSPX: Long-term trend -
Down! The very-long-term cycles have taken over earlier than anticipated and if they make their lows when expected, the bear market which started in October 2007 should continue until 2012-2014.

SPX: Intermediate trend -
Potential lows were made in October. A pull-back into November is probable, and new lows are still possible.

Sunday, November 02, 2008

As per several requests for a stock market analysis update, here is my current summary outlook for the FTSE 100 Stock Market Index. The FTSE 100 index has continued to build a base following the Great Crash of 2008 that took the index to a low of 3665, having since recovered to 4383, up 718 points / 19.5% in just 5 days. Whilst the day to day volatility has presented short-term traders with great opportunities however it has left long-term investors shell shocked.

Saturday, November 01, 2008

Don’t trust the Text Books - On reflection, there may be more to what is happening on the markets than meets the eye. For one thing, the gold price – the ultimate harbinger of fear in the economy – is stubbornly refusing to rise to new heights, and its oscillator has given a sell signal.

Saturday, November 01, 2008

The Paradox Of Thrift - A common topic of discussion in the media is the paradox of thrift — a term coined by John Maynard Keynes to describe the negative effect of increased savings on consumption. When threatened by recession we tend to consume less and save more. Keynes argued that the decrease in consumption has the effect of lengthening the recession. While accepted by many economists, this reasoning has a basic flaw. It assumes that savings and investment are independent of each other. In an ideal market-driven financial system, the two are directly linked, with savings financing new investment. An increase in savings would mean that interest rates are likely to fall. Falling interest rates would encourage new investment, more than offsetting the initial reduction in consumption.

Saturday, November 01, 2008

To many, things are starting to look rosier. Bank liquidity flows are starting to improve ... not great, but showing some improvement.

At the same time ... Bush knows it hasn't been enough of an improvement, so he warned banks that they better start opening up the lending spigots. Banks are afraid, risk averse, and resisting. Twenty five percent of "excellent credit rating borrowers" are being declined when trying to get a new car loan. Next, I expect that Bush will push the bank Regulatory Agencies to put a lot of pressure on banks to start lending.

Saturday, November 01, 2008

The consumer votes “ No Confidence .” - “The October survey recorded the largest monthly decline in consumer confidence in the history of the surveys. “Consumer confidence had already declined by mid 2008 by more than prior to any past recession and the steep October loss indicates that accelerated cutbacks in spending can be expected during the months ahead,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Overall, the data indicate that this will be the bleakest holiday spending season since 1980. “Consumers held the least favorable assessments of their finances in more than a half century and viewed their job prospects more negatively than at any other time since the end of 1980,” according to Curtin.

Friday, October 31, 2008

Reviewing the big-picture, monthly S&P 500 chart, let's notice that the monthly momentum (RSI) confirmed this month's (Oct '08) plunge and remains pointed straight down, which argues that the low has not yet been established. While the SPX -- and its corresponding ETF, the S&P 500 Depository Receipts (AMEX: SPY) -- could rally a bit more based on my nearer-term oversold work, perhaps into the 1040-1060 area, the overall chart structure suggests very strongly that thereafter we should expect another vicious period of selling pressure that drives the SPX beneath the 2002 low at 768.60 prior to the emergence of a sustainable "bullish" period.

Friday, October 31, 2008

To get some perspective on the current market conditions, it may be helpful to look at what some bear markets of the past have looked like.

Below is a chart that goes back to 1940, and you can see that what we've recently gone through was the second-worst five-day period of time over the last 68 years. It was essentially a market crash. The only other thing that's really even close was the crash of 1987.

Friday, October 31, 2008

If you want to beat the market, it is a good idea to learn how the Price Earnings ratio (PE ratio) is used. To investors the PE ratio is the most widely used indicator of the value of a stock and of the market. When the PE ratio of the market index such as the S&P 500 is high, it is considered a sign that the market may be over valued. On the other hand when the PE Ratio of the S&P 500 is low, it is normally a sign that the market is under valued. What is the PE Ratio telling us now?

Thursday, October 30, 2008

The Fed's decision to "selectively" lend $30 billion (each) to Mexico, Brazil, S. Korea and Singapore to try to ensure financial stability in the emerging markets triggered a late-session pop in the iShares Emerging Markets Fund ETF (AMEX: EEM) -- notwithstanding the plunge in ALL equity indices during the final 10 minutes of trading yesterday -- which extended into this morning.

Thursday, October 30, 2008

WHEN WILL THE MARKET BOTTOM? Following you will find Daniel Ferrera's cycle forecast of the S&P 500 for the next 30 years, out to 2036, as well as a projection of an expected rally for the next 3 weeks. Read on for details...

Thursday, October 30, 2008

The markets had a very strong session before -- and then after -- the FOMC announcement, when it lowered rates. Initially they dropped,but they rallied back sharply to new rally highs, then literally in the last 10 minutes the indices fell apart. The S&P 500 dropped nearly 50 points in 10 minutes, and the Dow 400 points, and they closed with a thud, down on the day on all the indices except the Nasdaq 100 which managed to salvage a small gain.

Wednesday, October 29, 2008

Today's financial papers read like a history of economic turmoil. In no particular order we have warnings the bank recapitalisation will not be enough if assets continue to fall (shouldn't be a surprise), a surging yen hitting Japan (who largely avoided the bank credit issues), worries over the IMF being swamped with it's relatively small fund of $250bn, Hungary, Iceland and the Ukraine looking into the abyss, global property prices falling at ever faster rates, mass redemptions of hedge funds, $3 trillion of corporate debt needing refinancing in the next 24 months, a BOE report that is frankly as depressing as you're ever likely to read (I hope) and to cap it all worries about the confidence in government debt if any or all of the above continues. Now that has to challenge even the most optimistic of all contrarian investors.

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